Integer Holdings Corporation (NYSE:ITGR) Q4 2022 Earnings Call Transcript

The 40 million we’re exiting, that does not have meaningful differentiation from a technology standpoint, which is part of why we’re exiting it. That will take four years to exit because of the amount of time it takes our customers to find an alternate supply and then get through the regulatory qualification process. So, I’ll just reinforce that was low technology, minimal technology differentiation. Contrast that with what we do in the rest of our business where we do have points of technological differentiation or manufacturing capability, process know-how differentiation and the other parts of our business are incredibly sticky. And so, we think that’s an important point, but it’s going to take another at least two to three years for that business to be transferred away, and we feel we can manage that as we look at the growth trajectory that we have, particularly with the strong pipeline of development programs that we’ve provided the leading indicators for the last couple of years, particularly with the emerging customer growth, where we outperformed in 2022, compared to what we thought we were going to do 1.5 years ago, and we’ve increased our outlook for 2024 based on that strong pipeline.

Matthew Mishan: Okay. Excellent. So, that’s a clear €“ that was a fully clean number, that’s fantastic. And then when you think about the emerging growth company guidance that you’ve given and the increase, how did you incorporate Aran and Oscor into that? I think Oscor was closed by the time you gave guidance on that last time. Did that help the number or are those maybe a little bit longer term as far as emerging customers?

Joe Dziedzic: They help the numbers, particularly in the out years. And so, it does contribute to the growth. And as those businesses are growing faster than the average, that contributes to the accelerated growth for sure. We also think the capabilities both of those businesses bring gives us the opportunity to do more, and that’s really from about capitalizing on the commercial synergies. Now that Oscor and Aran are part of Integer, we are having broader discussions with our customers who now see the strength, stability, size and scale of Integer and the ability to vertically integrate those capabilities. We think that will help us accelerate the growth. But right now, what we’ve incorporated in here is what we have visibility too, but we’re confident that those commercial synergies will play out over time and give us even faster growth.

Recognizing the development €“ product development cycle times, the businesses Aran, in particular, was acquired in April of last year, Oscor in December of 2021, it takes time then to turn those commercial opportunities into development projects then become sales. And so, the programs that require product development are probably not meaningful in the 2024 time frame, but there’s plenty of off-the-shelf products within Oscor in particular, that we can capitalize on sooner. And we’re beginning to see the growth potential of that. So, there are opportunities, and I would frame them as probably incremental and accretive to what we have on the slide here, but probably in the future years.

Matthew Mishan: Okay. And then just a near-term question before moving on to margins. Just any commentary on the cadence of organic growth and operating margin progression as you move through 2023?